Spotify, the music streaming behemoth that reported a whopping 180 million active users last month, is currently testing out a new feature in Australia that allows its freemium users to skip as many audio and video ads as they want while streaming.
This new function, dubbed ‘Active Media’, is Spotify’s way of shaking up the ultra-competitive digital audio advertising world. The feature could be a game-changer for users and advertisers who are looking for a more relevant, targeted experience.
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Spotify’s overarching goal for this test is to gather data on the ads that work best for specific users, allowing them to get a clearer picture of what kinds of ads users are actually liking.
Using that data, the company can then sell better targeted ads to marketers, creating a more relevant and enjoyable streaming experience for ad-weary listeners. Under ‘Active Media,’ advertisers won’t have to pay for skipped ads.
Spotify Goes All in on Ad Personalization
It’s possible that this test may work out to be beneficial in the long-term but it’s likely that ‘Active Media’ will be detrimental to Spotify’s ad revenue in the short-term. Despite the risks, Spotify’s global head of partner solutions Danielle Lee is optimistic. She told Ad Age,
“Our hypothesis is if we can use this to fuel our streaming intelligence, and deliver a more personalized experience and a more engaging audience to our advertisers, it will improve the outcomes that we can deliver for brands, it may work out to be mutually beneficial for both marketers and users in the long term.
Just as we create these personalized experiences like Discover Weekly, and the magic that brings to our consumers, we want to inject that concept into the advertising experience.”
Spotify’s decision to run the test in Australia is a smart move because of the country’s relatively small market. The revenue loss caused from the test won’t be quite as severe compared to a test run in the United States, giving the company a chance to weigh the pro’s and con’s of the test without the risk of financial fallout.
The Rise of On-Demand Streaming
If the test performs well in Australia and Spotify decides to roll out the feature to larger markets, the company could position itself as a digital music ad leader. Spotify could also deliver a painful blow to rival Pandora, the California-based streaming radio giant that has been dealing with mass user abandonment in recent years.
According to Forbes, Pandora claimed 73.3 million active users in November 2017, down from 81 million monthly active users in 2016. This dramatic loss of almost 8 million users puts the company in a precarious position.
Pandora’s drop in popularity can be attributed to growing consumer interest in music on-demand. These days, a service like Spotify or Apple Music, that allows its users to pick any song they want when they want, is far more appealing than a restrictive radio-based service like Pandora.
It’s undeniable that modern users are seeking more personalization and control over their music, especially when it comes to ads. While Spotify is working diligently to satisfy those demands in a way that will charm both users and marketers, Pandora has struggled to compete.
Ad personalization is not only a major selling point for users contemplating joining the site, it’s also a major selling point for marketers looking for platforms that provide more relevant ad targeting.
Under ‘Active Media, marketers will only have to pay for the ads users choose to listen to. This could give enlightening statistics to marketers who are struggling to create engaging content that users actually enjoy.
For most marketers, the thought of users having the power to skip their ads is, understandably, a scary thought but it’s important to look at the bigger picture.
Marketing is all about relevancy and targeting the right audiences at the right time. ‘Active Media’ could reinforce the idea that creating content users will actually enjoy is far more important than churning out ads that users will hate, even if more of them will see it.
It all boils down to quality over quantity and Spotify is harnessing the power of personalization to give brands a more interested audience base.